Bombardier and the Outlook for Business Aviation.

Jean-Christophe Gallagher is Bombardier Business Aircraft’s vice president strategy, marketing and innovation. In advance of this year’s EBACE, we interviewed him at Bombardier’s Global Completions Centre in Montréal, QC, Canada.

Phil Rose: Every year since 2008, business aviation experts have been predicting the market’s return to pre-recession levels. So far, we haven’t really seen it, although figures suggest that 2015 was a relatively good year. How does Bombardier Business Aircraft see the economic climate for the industry eight years after the markets fell?

Jean-Christophe Gallagher: It’s a complex question. First, we have to acknowledge that the world economy is just not firing on all cylinders, and that’s at the heart of what’s happening in business aviation. Unfortunately, the emerging nations right now are not contributing to the business aviation market at the level that was anticipated. Overall, the market has not recovered to the levels that we saw in 2007–08.

We experienced industry growth of about 5% between 2013 and ’14, but between 2014 and ’15 it was more or less flat. We last saw a peak in 2008, when our segments of the industry delivered more than 800 airplanes. Last year, those same segments delivered about 600 airplanes. Bombardier will be announcing its 2016 market forecast at EBACE. Going forward, I see continued growth, but the recovery is gradual.

PR: Economic conditions around the world vary widely, as do market prospects and the regulatory and operational environments for private and business aviation. Do you continue to see positive signs for growth in countries or regions beyond North America, Europe, China, and Latin America?

JCG: Yes. Last year, close to 80% of new business aircraft deliveries were to North America and Europe. This is a much greater percentage than we’ve seen in recent years, but it’s a short-term dynamic. As you know, the number one factor correlated to business aviation industry performance is worldwide economic growth. As soon as we see key regions exceeding 3% YOY growth, we’ll see business aviation come back strongly.

PR: How does Bombardier propose to maintain and increase market share — other than by “having the best products”? What strengths are you bringing to the table?

JCG: The answer is great products and exceptional customer experience. Our current product portfolio is the widest in the industry. It spans from the Learjet 70/75 (priced at around $10 million) to the Global 7000 (in the $75-million range).

Since 2012, we’ve brought to the marketplace the Vision flight deck version of the Global 5000/6000, the Learjet 70/75, the Challenger 350, and the Challenger 650. In addition, the Global 7000 is now due to enter service in 2H2018.

We have a huge installed base of more than 4500 airplanes, which includes over 1600 Challengers of all models, more than 700 Globals, and 2200 Learjets. I’d say 60% of the airplanes we sell today are replacement aircraft for the installed base. Another 20% are additions to the existing fleet. The last 20% would be concept buyers — people who have never owned an airplane before.

Learjet and Challenger interiors are all done in-house by Bombardier. Most Global completions take place here in Montréal. Everything — cabinetry, upholstery, etc — is built and installed right here. We employ an impressive array of craftspeople, and we deliver the best interiors possible. One of Bombardier’s key traits is that we provide a level of interior design quality that’s second to none.

We’ve invested tremendously in increasing our presence around the world, whether it’s service centers, regional support offices, or parts depots. As well as our 24/7 customer response center, which ensures speedy response to parts needs and unscheduled maintenance, we have mobile response units — specially equipped trucks, and a Learjet 45 that carries parts around North America — to get to the customer’s airplane as quickly as possible. For us, it’s all about designing beautiful jets while also providing an exceptional experience.

PR: Insofar as anyone can answer such a question, is Bombardier likely to sustain existing workforce levels and production rates at its facilities throughout 2016?

JCG: A year ago, faced with the evident softness of some emerging markets, we chose to realign Global-series production rates to avoid reaching a situation of overcapacity. We wanted to protect our brand and protect the residual values of the product. Of course, that reduction in production rates came with the difficult task of laying off some of our personnel. We made significant workforce announcements last year, and some further announcements earlier this year. At present, we have nothing further to announce.

PR: Last October, Bombardier was forced to streamline its business jet portfolio by canceling the Learjet 85 program. Separately, as we know, the Global 7000 entry into service has been delayed. Overall, do you predict a strong future for Bombardier Business Aircraft?

JCG: Yes, of course. When we launched the Learjet 85 in 2007, the entry-level and midsize segment of the industry was delivering around 200 airplanes a year. Last year, the industry delivered 40 airplanes in that segment. We’ve seen a complete collapse of that segment of the marketplace.

It was a difficult decision to cancel the Learjet 85, but it was a reflection of the state of the marketplace — and it allowed us to focus our efforts on the Global 7000. Last July, we announced a two-year delay on that program, and right now we’re tracking to plan. The first Global 7000 flight test vehicle (FTV) is progressing well in Toronto, FTV number 2 is just behind, and we’re starting to build FTV numbers 3 and 4. We’ve had very few cancellations for the product, and our customers are excited about receiving this aircraft.

PR: How would you characterize the ongoing market divergence between large-cabin bizjets and, let’s say, entry-level products?

JCG: What industry forecasters — including myself — have come to realize since the 2008–09 financial meltdown is that the light segment, which used to sell a large percentage of the airplanes in the industry, will struggle to get back to where it was before.

Business aviation started with light airplanes — but, because large airplanes are available today, buyers will often choose a larger airplane from the get-go. The traditional view of the industry — that you went from a light to a medium to a large airplane — was a view aligned with the times, where larger airplanes were becoming available and the business aircraft owner population migrated up. Today, it’s a different dynamic.

PR: That has echoes in my next question. The Global 5000 and 6000 are still consistent sellers for Bombardier. Are you seeing signs that existing customers are migrating toward the upcoming Global 7000 and 8000?

JCG: Great question. Our strategy in the large aircraft portfolio is to offer four airplanes priced from the $45-million range to around $75 million. Our new flagship Global 7000 is an aircraft without compromise. It’s the only airplane with the aerodynamics necessary to enable a max speed of Mach 0.925 and also land at steep-approach airports such as LCY. From a performance and comfort perspective, Bombardier is achieving the perfect combination of features — you get a four-zone cabin, you get high speed, and you get low-speed capability, all in one package. We see people buying a Global 7000 as their first aircraft. And we’ve seen some of our own installed base wanting to go for this larger airplane.

PR: The Challenger 350 — like its predecessor, the 300 — has become a consistently strong seller for Bombardier in the super-midsize category. What characteristics appeal to customers?

JCG: Last year, we delivered 68 Challenger 350s — twice as many as its closest competitor. It’s a perfect transcontinental airplane. You can take eight pax from New York to LA easily. The 350 provides a nice upgrade to the 300, with improved avionics, a new cabin, and upgraded engines, as well as aerodynamic improvements including redesigned winglets. Since deliveries started in June 2014, market response has been amazing. We’ll deliver the 600th Challenger 300-series aircraft this year.

PR: Deliveries of the Challenger 650 — successor to the 605 — are now under way. Is the type being well received by customers?

JCG: They love the airplane. It’s a workhorse — and it’s a great upgrade to the Challenger 600-series platform. The 650 has a brand new interior, upgraded avionics, and upgraded engines. The Challenger 600 series is the poster child for reliability and operating economics. Its 4000-nm range means it can fly direct between, say, the Eastern Seaboard of the US and Europe.

PR: Are you satisfied with the health of the Learjet 70/75 order book? Is Bombardier considering any model enhancements?

JCG: The Learjet 70/75 is truly the best Learjet ever built. It sells as a premium aircraft in the light category, and it comes with a state-of-the-art cockpit, the most comfortable cabin, and the legendary performance of a Learjet.

PR: And possible enhancements?

JCG: That’s the magic question. We’re always innovating. We have a few new things to announce on that product at upcoming shows.

 

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